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Exam 8: Pricing

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Question 1

Multiple Choice

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Why is direct segment discrimination more profitable than indirect segment discrimination?

A) The seller can set prices according to some characteristic of the buyers.
B) Buyers cannot choose to purchase the cheaper product.
C) a and b.
D) None of the above.

E) None of the above
F) A) and B)

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Question 2

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Why do airlines limit the number of cheap fares as compared with more expensive fares?

A) Raises profit.
B) Limits cannibalization of more expensive fares.
C) Reduces the marginal cost.
D) All of the above.

E) B) and C)
F) All of the above

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Question 3

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Why is direct segment discrimination more profitable than indirect segment discrimination?

Many movie studios stagger the release of movies - first in theaters, next streaming and cable TV, and then free-to-air TV. What type of pricing policy are they applying?

Consider an airline using uniform pricing. How should it adjust its pricing as the demand for air travel become more inelastic in the weeks leading up to Thanksgiving?

Consider an increase in freight rates which adds 50 cents to the average cost of goods at a sporting goods store. How should the store adjust its prices?

Consider an increase in freight rates that adds 50 cents to the average cost of goods at a sporting goods store. How should the store adjust the price of tennis rackets?

A manufacturer of Covid-19 vaccines sets higher prices in China than Indonesia. What conditions are necessary for this pricing policy to work?

Why is price discrimination more common in personal services such as career counselling and financial advice than other types of services?

A manufacturer of Covid-19 vaccines sets higher prices in China than Indonesia. Under what conditions does this pricing policy increase profit?

Since complete price discrimination is the most profitable pricing policy, would you recommend that all businesses apply it rather than direct and indirect segment discrimination?

Google continuously auctions slots for advertisements on its own and third-party websites. An advertiser may pay different prices for each slot, depending on the competition among the bids. What type of pricing policy is Google approximating?

Since complete price discrimination is the most profitable pricing policy, would you recommend that all businesses apply it rather than direct and indirect segment discrimination?

Many movie studios stagger the release of movies - first in theatres, next streaming and cable TV, and then free-to-air TV. What type of pricing policy are they applying?

Consider a publisher that delivers news through the Internet. Using technology, it can easily customize the news according to the reader's preference. How would this help in pricing?

How would the price elasticity of the demand for air travel change in the weeks leading up to Thanksgiving? Consider an airline using uniform pricing. How should it adjust its pricing?

Google continuously auctions slots for advertisements on its own and third-party websites. An advertiser may pay different prices for each slot, depending on the competition among the bids. What type of pricing policy is Google approximating?

Why do airlines limit the number of cheap fares as compared with more expensive fares?

Consider a publisher that delivers news through the Internet. Using technology, it can easily customize the news according to the reader's preference. How would this help in pricing?

Why is price discrimination more common in personal services such as career counselling and financial advice than other types of services?